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Richmond Fed's Lacker Says FOMC Should "Seriously" Re-Evaluate QE2

Tyler Durden's picture





 

Yesterday Richard Fisher, now it is Jeffrey Lacker's turn to speak out against QE2 and inflation concerns. Just more jawboning or are we actually going to see more dissenting votes finally? Keep in mind Lacker is an alternate member on the FOMC board in year 2011 and is not a voting member. From remarks presented by Lacker to the University of Delaware: "The Committee recognized that the provision of further monetary stimulus at this point in the business cycle is not without risks, and therefore committed to regularly review the pace and overall size of the asset-purchase program in light of incoming information and adjust the program as needed. The distinct improvement in the economic outlook since the program was initiated suggests taking that re-evaluation quite seriously. That re-evaluation will be challenging, because inflation is capable of accelerating, even if the level of economic activity has not yet returned to pre-recession trend."

Full note:

Jeffrey M. Lacker

President

Federal Reserve Bank of Richmond
University of Delaware
Newark, Del.

I do not often get invited to speak
outside of the Fifth Federal Reserve District, which is the Richmond
Fed's territory, but when I do, it is a pleasure to visit the district
of such a good friend and colleague as President Charles Plosser of the
Third Federal Reserve District. As President of the Philly Fed, Charlie
has spoken at this event in the past, which implies some measure of
continuity today, since I rarely find fault with his perspectives. That
said, I should note that my comments today on the economic outlook are
indeed my own, and should not be taken to implicate President Plosser or
any other of my colleagues on the Federal Open Market Committee (FOMC).1

Our
economy, overall, is growing at a steadily increasing pace and
inflation is low and stable, although, as always, visible risks to this
outlook for continued recovery remain. The most striking feature of this
recovery is that until recently it has been relatively slow compared to
past recoveries, particularly those following the two other severe
recessions of the past 60 years – the recessions of 1973-75 and 1981-82.

Why
has this recovery been subpar? The obvious explanation is that the
housing boom that preceded the recession has produced a housing stock
that is too large, both in number and size, relative to what households
want given current income prospects and credit market conditions. As a
consequence, residential investment has failed to make a positive
contribution to growth in this recovery. In contrast, residential
investment rose at an average of 40 percent in the first year of
recovery following the recessions of 1973-75 and 1981-82. Apart from
housing, other household outlays have grown relatively slowly in this
recovery as well. Consumer expenditures increased at an annual rate just
below 2 percent in the first five quarters of this recovery. In
contrast, in the two other severe post-war U.S. recessions household
spending grew by an average of 6-½ percent in the first year of
expansion, thereby adding considerably to GDP growth.

Recently,
however, consumer spending has picked up speed. Personal consumption
expenditures are estimated to have risen at a 4.4 percent annual rate in
the fourth quarter. The concurrent decline in the personal saving rate
suggests that many households see brighter income prospects ahead, an
assessment that is supported by emerging evidence that labor market
conditions are improving. Initial unemployment claims have been on a
downward trend since last summer. The unemployment rate has fallen by
half a percent over the last two months and by more than a percentage
point since the fall of 2009. Manufacturers have added to payrolls over
the last three months. And average hourly earnings continue to advance.
Granted, last Friday's employment report showed smaller net additions to
payrolls than expected. But an array of forward looking indicators of
employment trends point to continued labor market improvement. For
example, the employment components of several business surveys, such as
the ISM's, have shown increasingly positive readings, particularly in
the manufacturing sector.

The recent decline in the personal
saving rate also suggests that many households have made substantial
progress toward repairing their balance sheets. American households
stepped up savings during the recession in order to pay down debt and
rebuild assets. That prudence, combined with significant gains in equity
values since early 2009, has led to substantial improvements in the
financial positions of many households. Since the end of the recession,
the net worth of households has increased by slightly over $4 trillion
and is up substantially from its low point in the cycle. Given these
stronger fundamentals, it seems quite reasonable to project robust
growth in consumer spending this year.

Business investment also
should make a significant contribution to growth this year. Investment
in equipment and software has grown 22 percent since the end of the
recession. Opportunities to streamline business processes and reduce
costs through productivity-enhancing investments appear to be
widespread. And the pickup in demand growth is providing further
encouragement for capital spending plans.

Even investment in new
structures is showing some encouraging signs of bottoming out. Spending
for private nonresidential structures has risen slightly over the last
several months. And, a leading indicator for future spending, the
American Institute of Architects' Billing Index, has moved into positive
territory for the first time in over two years. Taken as a whole, then,
business investment is likely to add significantly to growth this year.

Prospects
for export growth also look encouraging. Exports of goods and services
have risen 18 percent since the end of the recession, adding 2 percent
to GDP growth. While growth in some of our major trading partners has
been uneven, expansion has been robust in important emerging economies.
Thus demand for American exports is likely to contribute to growth this
year as well.

Despite all that the economy has going for it, there
are still substantial challenges ahead. Housing activity obviously
continues to be depressed; residential investment has fallen nearly 60
percent from its peak at the end of 2005. Given the large inventory of
vacant homes in major markets and the ongoing foreclosure wave that
continues to generate sales, any advance in residential investment is
likely to be slow and uneven. Having said that, residential investment
is only 2-¼ percent of GDP, so the damage this sector is capable of
inflicting is in some sense limited.

All in all, then, I expect
noticeably stronger growth in overall activity this year than last. If I
had to write down a forecast today, it would be pretty close to 4
percent. A rate of growth in that neighborhood would result in continued
net gains in employment and further reduction in the unemployment rate.

This
generally positive assessment is complemented by the benign outlook for
inflation. Over the 12 months ending in December, the price index for
personal consumption expenditure has risen 1.2 percent. This low
inflation rate seems more consistent with our price stability mandate
than the figures over 2 percent that were common in the years leading up
to this recession. Many forecasters are expecting inflation this year
to come in between 1-½ and 2 percent. That is my expectation as well,
and would represent a good outcome. Still, recent increases in commodity
prices are showing up in consumer price measures and will put upward
pressure on overall inflation numbers in the months ahead. Just how much
is hard to say. The effect on overall inflation could be transitory, or
could persist if firms, encouraged by accelerating demand growth, pass
input prices on to their customers. Such pickups in inflation are common
at this point in business cycle upturns, and would be consistent with
the expected inflation rates implied by prices of inflation-indexed U.S.
Treasury debt, which show market participants now expecting inflation
to average 2 percent over the next five years, and as much as 3 percent
over the following five years.

That's the near-term outlook in a
nutshell. Beyond this coming year, the configuration of fiscal policies
could have a significant bearing on growth prospects. We have a serious,
long-term mismatch between the trajectories of federal spending and
taxes. Most of you are no doubt aware of the long-term budget
projections published by the nonpartisan Congressional Budget Office.
Their most recent projections, under plausible assumptions and current
legislation, show deficits falling from around 9 percent of GDP now to
around 5 percent of GDP in 2015 and trending steadily upward thereafter.
The ratio of debt to GDP rises from the current level of around 60
percent to 150 percent in 2030.

Be clear: there is no uncertainty
about whether the long-run federal budget imbalance will be corrected.
Continual increases in debt relative to the size of our economy are
simply not feasible and will not happen. The real question is how a sustainable path will be achieved. In advance, by deliberately adopting and following a credible strategy, or in extremis,
forced by investor retreat and collapsing market confidence to adopt
drastic emergency measures? We would be wise to heed the abundant
empirical evidence of the superiority of taking action before a fiscal
crisis is upon us.

One serious fiscal risk over the long-term
concerns the open question of the federal government's role in housing
finance. This year, Washington is poised to consider the fate of the
government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, now
operating under government conservatorship. The perception that these
two private mortgage intermediaries enjoyed implicit government backing
reduced the aversion of their creditors to large downside risks. The
resulting incentive misalignment, combined with escalating low-income
housing targets, drove the GSEs to accumulate significant exposure to
non-prime mortgages, which exacerbated the overbuilding and thus
contributed to the magnitude of the resulting decline.

Many
proposals would make government guarantees on home mortgages explicit
and priced; such proposals differ mainly in the nature of the
intermediaries through which such guarantees would be channeled. But
perpetuating guarantees for housing-related debt will continue to
artificially stimulate the risky leverage that critically fueled the
disastrous housing boom we have just experienced. The devastating
consequences of the housing bust suggest that government backstops for
housing finance are not worth the price of over-built, over-leveraged
and at times overheated housing markets, on top of the fiscal burden of
large contingent liabilities. I believe we should phase out government
guarantees for home mortgage debt. Otherwise, financial stability will
to be elusive, and fiscal balance will be threatened by repeated
boom-bust cycles in housing. Home-ownership may be a laudable social
goal, but if that is our objective, we should subsidize housing equity,
not housing debt.

I will conclude with a few remarks on monetary
policy. During the recession, the Federal Reserve cut short-term
interest rates to near zero and expanded the supply of central bank
money – that is, currency and bank reserves – from under $900 billion to
over $2 trillion, which in my view was an appropriate response to a
major economic shock. In addition, the FOMC in November decided to
further increase the supply of Federal Reserve money by another $600
billion by the end of the second quarter through purchases of long-term
U.S. Treasury securities. The Committee recognized that the provision of
further monetary stimulus at this point in the business cycle is not
without risks, and therefore committed to regularly review the pace and
overall size of the asset-purchase program in light of incoming
information and adjust the program as needed. The distinct improvement
in the economic outlook since the program was initiated suggests taking
that re-evaluation quite seriously. That re-evaluation will be
challenging, because inflation is capable of accelerating, even if the
level of economic activity has not yet returned to pre-recession trend.

We've
come through an extraordinary period in our economic history, which in
turn brought about extraordinary policy responses. As the economic
expansion continues to strengthen, the challenge becomes determining the
time and manner by which policy returns to a more normal mode of
behavior. The public's confidence that policy actions derive from a
coherent, sustainable long-term plan for policy – both monetary and
fiscal – will be an important factor supporting growth in the years to
come. I am hoping that we will see steady progress in 2011.

 


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Tue, 02/08/2011 - 09:55 | Link to Comment TooBearish
TooBearish's picture

Not a voting member - in that capacity that makes Lacker Just another asshole with an opinion

Tue, 02/08/2011 - 10:18 | Link to Comment snowball777
snowball777's picture

But TPTB take this 'asshole' with a much smaller grain of salt than say, Petey Schiff.

Tue, 02/08/2011 - 10:30 | Link to Comment unwashedmass
unwashedmass's picture

 

um, we haven't really had any riots here yet.....

and there's still quite a bit of the middle class' wealth left to seize....

i don't know why we would have to go there yet.

things are going really well -- look at how many people are now paying for food on credit...

i mean, we're talking serious debt slavery here for the US population within five years...total control...

that's what you might be potentially giving up if you change strategy now.

Tue, 02/08/2011 - 20:04 | Link to Comment Buck Johnson
Buck Johnson's picture

The reason why there isn't any riots here is because everyone is still getting some form of govt. assistance.  When that is taken away, then people will start to riot.

Tue, 02/08/2011 - 11:22 | Link to Comment Henry Chinaski
Henry Chinaski's picture

Didn't that FED statement last Fall say something about crafting FED communications to influence the market expectations?  This is  probably one of those communications...

More lies!

Tue, 02/08/2011 - 09:58 | Link to Comment Racer
Racer's picture

This is like watching a car crash in slow motion... like the Fed said 'sub-prime was well contained', now they are 'considering evaluating' QE2

It will be all just too late as usual and will then say they couldn't see it coming as no-one could have...

Yet the poor are in the bloody car hurtling to the cliff edge

 

Tue, 02/08/2011 - 10:12 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Weeeeeeeeee!!!!

--US bloody middle class.

Tue, 02/08/2011 - 10:17 | Link to Comment Hephasteus
Hephasteus's picture

It's ok Mrs Reagan will upload youtube videos about how to just say no to higher prices.

Tue, 02/08/2011 - 12:13 | Link to Comment AnAnonymous
AnAnonymous's picture

The obvious explanation is that the housing boom that preceded the recession has produced a housing stock that is too large, both in number and size, relative to what households want given current income prospects and credit market conditions.

 

It has more than anything else given the opportunity to US citizens to buy houses that should have not been built in the US at prices that should not be available without the creation of the housing bubble.

Tue, 02/08/2011 - 09:57 | Link to Comment gwar5
gwar5's picture

Still won't seriously count unless somebody from the FRBNY (mecca) pipes up.

Tue, 02/08/2011 - 10:11 | Link to Comment SheepDog-One
SheepDog-One's picture

In a world built completely on perception and suspension of disbelief, and it sure isnt 2008 anymore. ZIRP POMO fantasyland can only last so long.

Tue, 02/08/2011 - 10:24 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

U.S. railroads continued to build traffic momentum at January’s end. During the week ending Jan. 29, they originated 291,147 carloads, up 4.7 percent, and 222,742 intermodal loads, up 9.2 percent compared with volumes from the same week in 2010, according to the Association of American Railroads (AAR).

Fourteen of 20 carload commodity groups registered gains, while container volume climbed 10.1 percent and trailer volume rose 4.4 percent.

Intermodal volumes remained solid in the year’s fourth week “despite a weaker truckload start to 2011,” said Robert W. Baird & Co. Inc. analysts in their weekly “Rail Flash” report, adding that recent weeks’ volumes have modestly outperformed average seasonal trends.

Meanwhile, Canadian railroads reported weekly volume of 71,382 carloads, up 3.6 percent, and 45,694 containers and trailers, up 6.6 year over year. Mexican railroads’ weekly carloads climbed 13.1 percent to 15,148 units and intermodal volume rose 10.3 percent to 7,172 units.

Through 2011’s first four weeks, 13 reporting U.S., Canadian and Mexican railroads originated 1.5 million carloads, up 6 percent, and 1.1 million containers and trailers, up 6.5 percent vs. 2010 totals.

Tue, 02/08/2011 - 10:30 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

SS, yep all those rail cars filled with construction equipment and lumber for the exploding construction projects all over the USA.

or is it our food and minerals headed to china?

 

Tue, 02/08/2011 - 10:47 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

.... " Fourteen of 20 carload commodity groups registered gains, while container volume climbed 10.1 percent and trailer volume rose 4.4 percent. " ...........

Tue, 02/08/2011 - 11:31 | Link to Comment snowball777
snowball777's picture

And finally, something actually related to winter weather.

 

Tue, 02/08/2011 - 10:28 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture


From the American Trucking Association: ATA Truck Tonnage Index Jumped 2.2 Percent in December

The American Trucking Associations’ advance seasonally adjusted (SA)For-Hire Truck Tonnage Index increased 2.2 percent in December after falling a revised 0.6 percent in November. The latest improvement put the SA index at 111.6 (2000=100) in December, which was the highest level since September 2008. In November, the SA index equaled 109.2. 
...
ATA Chief Economist Bob Costello said that December’s improvement fits well with the see-saw pattern that many carriers are reporting. “Fleets continue to tell me that freight volumes are very choppy – up one week, but down the next. That is a trend that is likely to continue this year as the economy is not growing across the board yet.” Still, Costello said it was a positive sign for the economy that SA tonnage reached the highest level in 27 months. “I continue to expect truck freight tonnage to grow modestly during the first half of 2011 and accelerate in the later half of the year into 2012.”

This is the highest level since September 2008 - and it appearstruck tonnage is increasing again after stalling out last spring and summer.

Tue, 02/08/2011 - 09:59 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Here we go again with the "re-building Fed credibility by trotting out dissidents" farce again. 

Tue, 02/08/2011 - 10:06 | Link to Comment philgramm
philgramm's picture

++++1362

 

I think we all get the point.  Print money>>prop up market>>act as if there is dissent amongst the power brokers as per QE>>trot out next round of QE>>rinse and repeat

Tue, 02/08/2011 - 10:25 | Link to Comment SheepDog-One
SheepDog-One's picture

Some non voting member has QE dissent and thats 're-building FED credibility'? I dont really get that. But its basically over, theyre positioning for endgame behind the scenes I guarantee it.

Tue, 02/08/2011 - 10:28 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I didn't say they would be successful.

Plus, their lies are directed towards those who wish to be lied to. Don't make the mistake of assuming people are willing to see something they are paid financially or psychologically not to see.

Tue, 02/08/2011 - 10:34 | Link to Comment william the bastard
william the bastard's picture

QE is over. The event is a fait accompli. Prepare yourself accordingly.

 

Tue, 02/08/2011 - 10:10 | Link to Comment umop episdn
umop episdn's picture

O, RLY? Here's some quotes from the Big Bearded Face:

March 28, 2007: “The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”

May 17, 2007: “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

Feb. 28, 2008, on the potential for bank failures: “Among the largest banks, the capital ratios remain good and I don’t expect any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.”

June 9, 2008: “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

July 16, 2008: Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.”

Tue, 02/08/2011 - 10:01 | Link to Comment the not so migh...
the not so mighty maximiza's picture

The planetary economy will collapse the moment they stop the QE program.  Everyone knows it.   This is all they got left.  No organic growth is happening in any meaningful way to stop the QE program.   

Tue, 02/08/2011 - 10:19 | Link to Comment SheepDog-One
SheepDog-One's picture

Zactly, we got such a Stockholm Syndrome epidemic in this Divided States of Complacency. 

Tue, 02/08/2011 - 12:16 | Link to Comment AnAnonymous
AnAnonymous's picture

The planetary economy will collapse the moment they stop the QE program.  Everyone knows it.  

 

I dont know it. I strongly doubt it. That is material for years to come for every economist in the world: QE saved the world, QE made the situation worse, QE delayed recovery etc Economists probably work on gathering supportive data to cover all the angles, providing no information in the mix.

There might not be anoter QE session. Would be telling outright. My thought is  that the world economy will not collapse.

Tue, 02/08/2011 - 12:23 | Link to Comment the not so migh...
the not so mighty maximiza's picture

I hope your right AnAnonymous

Wed, 02/09/2011 - 00:39 | Link to Comment ElTerco
ElTerco's picture

...but you probably aren't.

Tue, 02/08/2011 - 10:03 | Link to Comment billwilson
billwilson's picture

The recent decline in the personal saving rate also suggests that many households have made substantial progress toward repairing their balance sheets. American households stepped up savings during the recession in order to pay down debt and rebuild assets. That prudence, combined with significant gains in equity values since early 2009, has led to substantial improvements in the financial positions of many households. Since the end of the recession, the net worth of households has increased by slightly over $4 trillion and is up substantially from its low point in the cycle. Given these stronger fundamentals, it seems quite reasonable to project robust growth in consumer spending this year.

 

Those equity gains are not guaranteed to stay there. Turn off the taps and let's see what happens.

Tue, 02/08/2011 - 10:07 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

you can't do what is best for USA, when you are running an international bank..so you do what is best for the bank. Ben holds all this debt he cannot let interest on it explode. So he cannot maintain a strong dollar, keep inflation down, and finance the public debt he took on.

a swan song for the fed is my hope.

Ron Paul needs to speak up and I expect he will.

We are one bad bond auction away from collapse of the FRN..that exit looking awful small and getting smaller.

 

Tue, 02/08/2011 - 10:11 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

One added point: Ben is not creating jobs nor can he. UE is such a major drag on any economic growth in our Service economy that for the mass of people even those who benefit from the wall street melt up cannot offset the loss of purchasing power of the UE plus the debasing of the FRN.

Tue, 02/08/2011 - 10:08 | Link to Comment blind squirrel
blind squirrel's picture

QE3 is losing momentum.  Maybe I'll hold off purchasing physical gold coins....

Tue, 02/08/2011 - 10:20 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

gold is moving outside the FRN control.

I would buy all I could and hold for the day BEN falls from the high wire ..too many moves in gold and silver point to a decouple from the FRN

the other global powers are setting up the PM's as an escape from the FRN.

If not then PM.s never go to 0.

Tue, 02/08/2011 - 10:38 | Link to Comment william the bastard
william the bastard's picture

When the formal end of QE is announced, gold will already have been blowtorched.

Tue, 02/08/2011 - 10:58 | Link to Comment taraxias
taraxias's picture

The only thing that needs to get blowtorched is all the garbage you keep posting on here.

Tue, 02/08/2011 - 10:21 | Link to Comment Hephasteus
Hephasteus's picture

Oh look the fed is tryng to grow marywanna by planting seeds in a fucking granite rock again.

Baby your a failure work.

Come on join the circle jerk.

Derp derp derp.

Derp derp derp.

Come on baby win the day.

We'll let your join our army if your gay.

http://www.youtube.com/watch?v=QGJuMBdaqIw

 

Tue, 02/08/2011 - 10:24 | Link to Comment SheepDog-One
SheepDog-One's picture

YEA anyone with a brain this last 2 years has been a total insult, but Stockholm Syndrome is the main trait of americans today!

Tue, 02/08/2011 - 10:29 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

The US standard of living is very high. They have a lot to lose. They will take a long time to get rolling. That is reasonable.

Risking it all on a roll of the dice is not for the faint hearted.

Tue, 02/08/2011 - 10:59 | Link to Comment Hephasteus
Hephasteus's picture

You just don't get it. Police in places are torturing people with electric drills. This is not happening in the west. This is happening in the east. What happens when some nutless weak minded ego extension in the west is suddenly faced with an overwhelming uncontrollable rage to go all black and decker on his local police department.

What happens in some shit hole on the other side of the planet won't stay on the other side of the planet.

The awake are the only ones strong enough to deal with this fairly and conciously. It's best to start dealing with it civilly because what happens with the subconcious crowd will be wtf wrapped in unintended consequences with a chewy center of please stop scaring the fuck out of steven speilberg. And you throw a million psychological profilers at it and you won't paint one fucking targeting laser on what is happening.

So much for your rodent free corps.

http://www.youtube.com/watch?v=Z6hL6fkJ1_k

Tue, 02/08/2011 - 11:37 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

With the advent of automatic weapons, there has not been a single popular uprising that has succeeded without foriegn support.

With all the nations of the world controlled by socialists now, don't expect freedom anytime soon.

The thousand years of darkness has arrived.

Expect a one world, electronic currency. Then End is near.

Tue, 02/08/2011 - 19:57 | Link to Comment Hephasteus
Hephasteus's picture

You guys probably should have done that before you went and pissed the whole world off. But it's nice you can talk tough as it all falls apart. At least you have your dignity.

What's that relationship between a guns projectile weight and energy and the guns weight the felt recoil formula. Sounds like you guys are designing a nice little rail gun to get your ass shot to someplace far away and lonely.

What do 7 billion people feel when they shoot 100 million assholes off into the fuck off zone?

My guess is recoil.

Tue, 02/08/2011 - 10:10 | Link to Comment The Axe
The Axe's picture

The B is in control....non-voting member....more QQQQQ  

Tue, 02/08/2011 - 10:43 | Link to Comment william the bastard
william the bastard's picture

It's over. Resolve your denial phase before the others.

Tue, 02/08/2011 - 10:19 | Link to Comment themosmitsos
themosmitsos's picture

Come QE3 time, he'll vote "for" just like all the other hypocrites though

Tue, 02/08/2011 - 10:21 | Link to Comment SheepDog-One
SheepDog-One's picture

Vote 'for' more QE as the dollar tanks and gas goes to $5, gold to $1,600...hey go for it Ben whatever.

Tue, 02/08/2011 - 10:21 | Link to Comment monopoly
monopoly's picture

The day the Fed stops printing is the day the markets collapse, if not sooner.

Tue, 02/08/2011 - 10:25 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

I have a feeling this will end like THE TRAIL OF TEARS from the 1830s and those poor native americans.

The Supreme Court ruled with them saying we cannot bump them from their land they have occupied for however long...

Then Andrew Jackson, the Pres. at the time, forced the Indians out to Oklahoma and simple asked the Supreme Court..."whatcha gonna do about it?"

The President trumped the highest court in the land.
In today's terms...no matter if EVERY dead beat disagrees with Banana Ben, he will do it anyway!

Tue, 02/08/2011 - 10:27 | Link to Comment SheepDog-One
SheepDog-One's picture

Go ahead and let him, Im actually looking forward to overnite seeing dollar wont buy anything, $5-$7 gas, food crisis, 3rd world america...and all banks will be the targets of the rioters. Whatever bring it on.

Tue, 02/08/2011 - 11:38 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

Sheep,

For real though. I have an idea that the sitch you explained is how it must end. The OpEd piece in the NYT yesterday about the gap between the top 10% and the rest of the world and how it's 'ground and pound' on the have-nots. If you think about it in wrestling terms, the US is thrown to the ground again a few years ago. The ref calls a brief time-out so we can get back up.

Now, we have the consumer being pounded by US corporations. It is a war tactic that was widely used in every single war I bet. Cut off supplies/food to the enemy. Which happens to be the most painful way as it is slow and deadly.

 

However, at some point, just like you said, people will take to the streets and the game will be reset. Throw that Monopoly board up in the air...do-over!

 

Pink Floyd said it best...."..Hanging on in quiet desperation is the English way....THE TIME IS GONE....THE SONG IS OVER...thought I had something more to say..."

 

 

Tue, 02/08/2011 - 14:59 | Link to Comment MachoMan
MachoMan's picture

For a more specific example, maybe Jackson v. Silva I, where Wandy got a yellowcard from the bottom and came back to K.O. Jackson?  [aside from giving Wandy an easier bracket in the grand prix, etc.]

Tue, 02/08/2011 - 10:28 | Link to Comment A Man without Q...
A Man without Qualities's picture

The US economy is in the eye of a hurricane.  ZIRP, QE and a 10% deficit are creating the illusion of growth, when actually it's a massive dose of inflationary  stimulus to counteract the deflationary forces.  Miraculously, the net is to give a mildly positive growth number (aided by the magic of dodgy CPI/ price deflator measures), but they have to reduce the boost soon or real, ugly inflation will get hold and yet prey that the deflationary forces have abated sufficiently.  However, the equity markets (and the pension funds linked to it), housing and unemployment, plus the need to pay the US government debt are such massive drags.  

It's coffin corner, can't speed up or slow down as they will crash either way.

Tue, 02/08/2011 - 10:28 | Link to Comment johny2
johny2's picture

It is too late...some things can not be simply undone, and the QE2 is already going on full steam ahead. The only question is when the QE3 sails out?

Tue, 02/08/2011 - 10:28 | Link to Comment Cash_is_Trash
Cash_is_Trash's picture

I am hoping that we will see steady progress in 2011.

Yes we will Mr. Lacker, just that Au and Ag will continue their relentless rise in dollar terms.

Thanks for ruining our medium of exchange -- motherfuckers.

Tue, 02/08/2011 - 10:30 | Link to Comment props2009
props2009's picture

China invests into EU. They are really going to dump the dollar.

http://dawnwires.com/investment-news/china-world-wide-investments-this-i...

Tue, 02/08/2011 - 10:38 | Link to Comment Dick Darlington
Dick Darlington's picture

The Bernank could redirect the monetization to Ireland. Again some additional losses are lurking juuuuuust behind the corner. Unexpectedly of course.

02-08 09:03: Anglo Irish Bank Chairman said nation's lenders may need about a further EUR 50bln of capital, more than absorbing a bailout fund for the banks
Tue, 02/08/2011 - 10:39 | Link to Comment pragmatic hobo
pragmatic hobo's picture

... without rise in wage, fear of inflation is just that ... fear. If wage rises, then inflation is warrantied. So either way, nothing to fear but fear itself.

Tue, 02/08/2011 - 10:41 | Link to Comment william the bastard
william the bastard's picture

Don't worry about heart disease until you get it?

 

Tue, 02/08/2011 - 10:42 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Just have shove in a stent and keep on truckin.

Tue, 02/08/2011 - 10:46 | Link to Comment pragmatic hobo
pragmatic hobo's picture

inflation is not a disease but consequence of expanding wage and therefore rise in demand. Problem with Bernanke's method of driving inflation higher is that wage is not rising with price. So eventually when price gets higher enough it will cause demand to fall.

Tue, 02/08/2011 - 10:49 | Link to Comment william the bastard
william the bastard's picture

Wage inflation is like hepatitis C; easy to get and hard to get rid of.

Tue, 02/08/2011 - 10:46 | Link to Comment william the bastard
william the bastard's picture

In other bullish developments:

Stuart Varney says" "Buy big-cap American growth stocks"

 

Tue, 02/08/2011 - 11:04 | Link to Comment Stuart
Stuart's picture

Is this retard so disconnected that he could actually believe the economy could stand on its own feet?

Tue, 02/08/2011 - 11:10 | Link to Comment system failure
system failure's picture

Mercy, they have too many people on the same side of the trade and trying to break it up a little. Afterall, volumes are way off and the main players are not reaping the profits they figure they sould be getting from the handouts. This is damage control with reverse psychology.

Tue, 02/08/2011 - 11:21 | Link to Comment Dadoomsayer
Dadoomsayer's picture

Isn't this just more good cop bad cop?

Tue, 02/08/2011 - 11:24 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Yes, I believe it is.

Tue, 02/08/2011 - 11:25 | Link to Comment buzzsaw99
buzzsaw99's picture

His mouth is like a sewer hole.

Tue, 02/08/2011 - 11:32 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The voting members will politicize this, with a minority block voting no and appearing to oppose Bernanke, while the majority block rubber-stamps Bernakiciding Amerika.

 

It will look just like the SCOTUS, soon.

Tue, 02/08/2011 - 11:38 | Link to Comment cougar_w
cougar_w's picture

inflation is capable of accelerating, even if the level of economic activity has not yet returned to pre-recession trend.

Translation: "Okay suckers this is all you get before the storm hits. Deal with it."

Tue, 02/08/2011 - 11:45 | Link to Comment dark pools of soros
dark pools of soros's picture

didn't everyone watch HBO's Reagan??   FEED ME QE TILL WE BLEEEEEED

Tue, 02/08/2011 - 12:57 | Link to Comment ak_khanna
ak_khanna's picture

The only people who are feeling the economic recovery are the ones who are either direct or indirect beneficiar­ies of the bailouts or QE. They are the top few % of the population whereas the rest of the population are battered down with unemployme­nt, foreclosur­es and exhorbitan­t cost of living because of rising food and energy prices.

Hence it does not make sense for the companies to either hire people or expand their businesses as only the rich people on their own cannot create enough demand to replace the rest of the population­.

http://www­.marketora­cle.co.uk/­Article245­81.html

Tue, 02/08/2011 - 13:30 | Link to Comment redarrow
redarrow's picture

Its going to be his boss who has the final word. If he believes more QE is neccessary he will inject it into the economy. Food riots are a distant threat in the land of fiats and fatso's.

The US will recover. Its people have been working for 5 years now since the recession began, their net worth now is higher than it has been, due to QE and whatever they have managed to save and due to mark to fantasy.Due to a number of cross currents housing will continue to drop but it may not have that much of an effect on the economy. Layoffs will rise but the banks will foreclose from all the money they have made over the years due to the Feds largesse. On a net basis, we will be worse off with a lower quality of life but the stats and numbers will show that we have recovered. It is the way it will be.

However, the Fed and the markets will have one heck of a job pulling liquidity in the markets I dont know how you can keep rates low this long and then expect the market to be unaffected when you remove support. Once the support is removed, yields will rise and equities will drop.

There will be more people who will remain unemployed and on welfare but the unemployment rate will drop as they will not be counted anymore. The irony is that after a while the employment picture will brighten as the months roll forward it but the wages will decrease.

Some intervention, the rich kept their money and the ranks of the poor increased.

Well done Bernake. Perhaps you can add that to your thesis.

 

Tue, 02/08/2011 - 14:18 | Link to Comment sbenard
sbenard's picture

"Well done Bernake. Perhaps you can add that to your thesis."

You mean he shouldn't add it to his RESUME?

Tue, 02/08/2011 - 13:36 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Part of the original draft:

"But perpetuating guarantees for TBTF-related debt will continue to artificially stimulate the risky leverage that critically fueled the disastrous banking implosion we have just experienced. The devastating consequences of the TBTFs' bust suggest that secret government backstops for bankers and their risky casinos of finance are not worth the price of over-built, over-leveraged and at times overheated stock markets, on top of the manure piles of large contingent liabilities in respect of trillions of derivatives. I believe we should phase out our secret government guarantees for bankers' debt. Otherwise, financial stability will to be elusive, and fiscal balance will be threatened by repeated boom-bust cycles in our economy. Keeping banks wealthy is considered a laudable social goal only in certain very small Wall Street circles of society; and so if enriching the people of the United States of America is our goal, as well it should be, we should focus on policies that help create jobs and real wealth for the many, not bonuses for the elitist few made possibly by government backstopped debt of gargantuan proportions."

Tue, 02/08/2011 - 14:14 | Link to Comment sbenard
sbenard's picture

"inflation is capable of accelerating, even if the level of economic activity has not yet returned to pre-recession trend"

 

Ya think?

Tue, 02/08/2011 - 14:46 | Link to Comment thepigman
thepigman's picture

Lacker sees rates rising every day

in a shitty economy because all of idiot

Ben's QE2 goes toward jacking

stocks and commodities. Another

fraud bubble to keep the spirits of

the unemployed high while they

apply for mini-mart cashiering jobs.

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